Short answer: Interest is the cost of borrowing. Calculated daily on remaining balance. Early payments are mostly interest.
When you borrow money for a house, the bank charges interest. Interest is the cost of borrowing. It is calculated daily on your remaining loan balance. Early in your mortgage, most of your payment goes to interest, not the loan itself. Later, more goes to the loan. This is called amortization.
Loan Amount: $500,000
Interest Rate: 7.0%
Monthly Payment: $3,327
First Month Interest: $2,917
First Month Principal: $410
Interest Ratio: 87.6% of first payment is interest